Ask a Banker Questions?

Rosantina Aranda Owner of Business Lending Advocate

FAQs

What do I need to apply for a business bank loan?

You will need the supporting documents that help the bank determine if you can afford to borrow. For a business loan the bank will evaluate your personal and business historical and year to date financial information. This may includes two years of tax returns, a year-to-date most recent Balance Sheet, Profit and Loss statements, and a Personal Financial statement.

How do I know whether or not I'll qualify?

There are many factors a bank uses to qualify a business for a loan, although the top 3 will be cash flow, credit score, and collateral.

Does the bank need to know the purpose for my loan?

Business owners must be very clear about the purpose for the loan and the amount that they need. Most business owners walk into a bank expecting the banker to give them that information. In reality, it is the business owners responsibility to determine what the loan proceeds will be used for and how much they will need.

Will my credit score affect my ability to get the best loan interest rates?

Yes. If your credit score is low (typically below 650), you will be considered high risk. This commonly results in a higher loan interest rate. However, there are some steps you can take to improve your credit score in as little as 1-3 months.

Can I still borrow money with a poor credit rating?

Yes. It depends on what is causing the poor credit rating. Banks are more willing to overlook collections for medical reasons. Although, if you have bankruptcies, liens or non-medical related collections, it is unlikely to get approved for the loan.

Will I need to secure a loan against my real estate property?

It depends. Banks typically will want to secure the loan with it’s intended purpose of the loan proceeds.  If you are purchasing or adding improvements to a real estate property the bank may require you to secure it against a loan. Bankers also use the term collateral. They will want to use the property as collateral and will put a lien on it.

What do I do if I don’t understand the banking terminology?

Bank terminology is typically similar to accounting terminology; most CPA’s can help explain it or you can always ask the banker to explain it.

What happens if my financial situation changes throughout my application process?

You will need to communicate any changes to your banker. If your income decreases, it can affect the banks approval decision.